The UK CPIs Overview
The cost of living in the UK as represented by the consumer price index (CPI) for December is due later on Wednesday at 0930 GMT.
The headline CPI inflation is expected to arrive at +0.2% inter-month in December while the annualized figure is seen steady at +1.5%. The core inflation rate that excludes volatile food and energy items is also likely to have steadied at 1.7% YoY last month.
Deviation impact on GBP/USD
Readers can find FX Street’s proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 15 and 80 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 120 pips.
How could it affect GBP/USD?
At the time of writing, GBP/USD is trying hard to regain the 1.3050 level, as it remains well bid ahead of the UK CPI data release. A below-forecast UK price pressures data could revive the recent downtrend in the pound. Meanwhile, the cable could extend the correction towards 1.3080 should the data blow past expectations.
According to NDDFX’s Senior Analyst Yohay Elam, “the Technical Confluences Indicator is showing that pound/dollar is sitting above a cluster of support lines at 1.3018, an area which includes the previous weekly low, the Bollinger Band one-hour Middle, the Fibonacci 23.6% one-day, the Simple Moving Average 5-4h, and the BB 15min-Lower. If it rises from this level, substantial resistance awaits at 1.31, which is the convergence of the SMA10-one-day, the Fibonacci 38.2% one-week, and the SMA 200-4h.”
“Below 1.3018, GBP/USD has strong support at 1.2897, a juncture of lines including the PP one-day S3, the PP one-week S2, and the previous monthly low,” Yohay adds.
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About the UK CPIs
The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).